ENVIRONMENTAL CONSIDERATIONS IN THE FERTILIZER USE DECISION

The increase in the use of fertilizer in agricultural production has b een associated with a substantial increase in agricultural productivit y in the United States. This increase in fertilizer use has been drive n by a variety of economic forces including variations in the price of output and changing relative factor prices. Associated with the incre ase in the use of fertilizer have been adverse environ:al mental conse quences that are not reflected in the costs and returns of agricultura l production. That is, externalities exist whose cost need to be inter nalized. Because the use of fertilizer has been shown to respond to ma rket forces, it is efficient to use the market to control the use of f ertilizer. This can be done through, for example, the use of a fertili zer tax.